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FINA Committee Meeting

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[Recorded by Electronic Apparatus]

Tuesday, November 30, 1999


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The Acting Chair (Mrs. Karen Redman (Kitchener Centre, Lib.)): I would like to bring this meeting to order and thank all the witnesses who are here today to give us some advice and comments as we deliberate the prebudget report that will go in to the Minister of Finance today.

We are joined by the Canadian National Institute for the Blind; Community Foundations of Canada; Portland Hotel Society; Prospectors and Developers Association of Canada; and the City of Timmins.

My understanding is that you have each been directed that you have five minutes to make your presentation, and then you will be questioned by the committee. I would like to start with Mr. Angelo Nikias, national director, government relations, international liaison, and Ms. Fran Cutler, national board member, from the Canadian National Institute for the Blind. Welcome.

Ms. Fran Cutler (Vice-Chair and Chair-Elect, Board of Directors, Canadian National Institute for the Blind): Thank you, Madam Chair. I am the vice-chair and chair-elect of the board of directors of CNIB.

We have roughly 100,000 clients from coast to coast to coast. We are here with what we think is a very encouraging message. We believe that by some judicious adjustments to budgetary policy and to budgets, you can indeed have a significant impact on the lives of blind, vision-impaired, and deaf-blind Canadians, because you can improve access to education, including lifelong learning, to employment, and to enrichment of life.

It was indeed encouraging to hear so many references in the Speech from the Throne last month to connecting Canadians through the information highway and the Internet, which are now accessible to blind, vision-impaired, and deaf-blind Canadians, and to hear many references to the voluntary sector and to people with disabilities.

We're aware that committee members, as well as ourselves and many other organizations representing people with disabilities, are now aware that people who are traditionally in the social policy envelope can be moved over to the economic policy side of things through measures that enable people who are referred to as disabled to take full part in Canada's economy through such things as employment supports, encouragement and incentives in the tax sector, and support of such things as access—in our case, access to the printed word, to visual materials through our own library and through other libraries and the Internet, and access through assistive devices.

I will ask my colleague Angelo Nikias to speak. Angelo is our director of government relations and international liaison, fresh from a visiting delegation of 18 Chinese officials dealing with issues to do with disabled people in China.

Mr. Angelo Nikias (National Director, Government Relations, International Liaison, Canadian National Institute for the Blind): As my colleague indicated, the Canadian National Institute for the Blind collaborates with the Government of Canada, with other social partners, and especially with blind Canadians themselves—by which we mean people who are totally blind, people who experience any degree of vision loss, and people who are deaf-blind.

We are in the business of independence. In other words, we are trying to create those social conditions that enable blind Canadians to become active participants in our society.

Indeed, as we examine the policy documents of the federal and provincial governments, we find that at this stage in our development in Canada, we have come to a shared vision about disability and disability-related policies. The document that described this vision most recently is called In Unison, and it is an agreement between the federal and provincial governments spelling out the types of achievements we need to pursue over the next few years in order to ensure that the shared vision we have is put into practice.

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There are three specific issues I would like to address in the next few minutes, and they all fit into the philosophical framework we think we have laid out up to this point.

The first issue I will address has to do with employment. Disabled Canadians generally, and blind Canadians in particular, have been making great strides in their effort to participate and to become active participants in our economy. Both levels of government have contributed to this effort.

The most active federal program at this point, under the Department of Human Resources Development, is called the Opportunities Fund. Under this fund, which was set up three years ago, a number of disabled Canadians and service providers are working together towards creating employment opportunities for disabled Canadians, including blind Canadians.

Only a week ago the reference group of persons with disabilities, which advises the department on the functioning of the Opportunities Fund, met in Ottawa, and we took the opportunity to convey to the minister the urgency of the situation. The Opportunities Fund expires at the end of March 2000, and because it has not been officially renewed at this point, a number of organizations find themselves in a situation where they perhaps have to start winding down the existing infrastructure.

I would like to take this opportunity to call on your committee to do everything you can to ensure that the Opportunities Fund is expended and extended so the valuable work we have done together up to this point is ensured and continued. We have already written to the Honourable Jane Stewart, and it is certainly a matter of urgency for the committee at this point to support the extension of the fund.

Another issue that was addressed in the In Unison document, to which the federal government is a signatory, has to do with disability supports. That's very important, because the disability supports we use are tools of independence. One can think of talking computers or of programs that produce Braille, like the Braille I am using right now. One can think of white canes, which blind people use for moving around independently, or one can think of wheelchairs. The fact of the matter is that in Canada we have a very fragmented system of providing accessibility supports to people.

Recently, with the support of Human Resources Development Canada, the CNIB conducted a study to examine the equity or inequity in the country between provincial jurisdictions. I will not go into detail because we have provided you with a copy of our study, called Toward Implementing in Unison, but I want to say a couple of things.

Generally we found that the system we have in the country is very fragmented and in fact creates inequalities and inequities between groups of blind Canadians, especially based on where they happen to reside. Only four provinces in Canada have existing provincial programs. Let me give you an example in case you think this is all theoretical.

Half of the city of Lloydminster is in Alberta and half of it is in Saskatchewan. In fact, the dividing line is the main street. Lloydminster is served by the CNIB division in Saskatchewan. The Alberta program provides for high-tech equipment for blind people, but it does not provide for low-tech equipment. By high-tech, we are referring to things like computers, and by low-tech, we are referring to things like white canes.

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The Saskatchewan program provides exactly the opposite. It provides for low-tech equipment, but not high-tech equipment. So depending on where you happen to reside on the main street of Lloydminster, you may be entitled to high-tech or low-tech. This is, I think, a striking example of the challenges we face in Canada.

Moreover, because Lloydminster is served by the CNIB division in Saskatchewan, our workers must be able to distinguish between the two programs, become experts not in providing services but in jurisdictional entanglement. I think that's something we need to address. We have a responsibility as a country to address and remove these inequities and inequalities and ensure that all Canadian citizens have equitable and harmonized access to programs across the country.

The Acting Chair (Mrs. Karen Redman): Mr. Nikias, would you like to make a concluding statement?

Mr. Angelo Nikias: Yes, indeed I will.

The Acting Chair (Mrs. Karen Redman): We'll keep time for questions after.

Mr. Angelo Nikias: The last point I wanted to address has to do with provision of access to print information. We have addressed in the past the need for the Government of Canada to contribute to enhanced library services for blind Canadians. This need remains. Again, we have explained it in some detail in our interim brief.

However, I wanted to close by thanking the Government of Canada, which recently, through the millennium fund, provided $800,000 to a consortium, in which the CNIB is an active participant, to begin the challenge of putting Canadiana in digital form.

The Acting Chair (Mrs. Karen Redman): We'll now hear from Ms. McInnes, vie-chair of Community Foundations of Canada. Welcome.

Ms. Barbara McInnes (Vice-Chair, Community Foundations of Canada): Thank you. I thank you for the opportunity to very briefly highlight a few of the things that were included in our written submission that was forwarded to you in September.

Just by way of background, community foundations, for those who are not familiar with them, are unique charitable vehicles that allow generous citizens to invest in their communities' ongoing and changing issues and needs, and at the same time achieve their own philanthropic objectives, primarily through permanent and well-managed endowments that generate impacts forever within their communities.

Canada's 90 community foundations now hold combined assets of $1.05 billion. During 1998, they made over $50 million in grants to support local priorities across the country. Many of you in fact probably come from communities in which community foundations are playing an important role in improving the quality of life.

Though each community foundation is autonomous and accountable to its own community, we belong to a strong national network, Community Foundations of Canada, and it's on behalf of that national network that I'm here today. It's through that national organization that we are able to speak with one voice when it comes to issues that are important to us all, such as those that are dealt with by this committee.

I'll just briefly mention the recommendations that we made in our written submission, then I'll talk at a little bit more length about the ones that we perhaps consider more important than the others.

First of all, we urge that in due course, serious consideration be given to the recommendations of the final report that will be made by the joint table. That isn't yet available, but we are participating with a number of other voluntary-sector organizations in a dialogue with government that we think will lead to some very productive recommendations.

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The second recommendation we made in our written submission—and we provided some background to it at that time—was that consideration be given to looking at the 4.5% disbursement quota that applies to all foundations that are holding permanent assets, in particular as it applies to the small community foundations in Canada.

A third recommendation is that we look at perhaps reducing a very unproductive administrative load at community foundations by assuming that all contributions to community foundations are intended to be held in perpetuity unless otherwise advised in writing by the donor. The reverse situation is in effect right now.

We also urge the committee to explore some transparent and straightforward mechanisms that would permit non-registered organizations to receive grants from community foundations.

While we hope that all of those will be given some consideration, the proposal we most want to emphasize today is the extension of the reduced capital gains tax for gifts of publicly traded stocks. In fact, we urge you to consider the benefits of eliminating that tax completely for such gifts.

We think our experience at Community Foundations mirrors others in this sector. In its initial phase, it has already made an enormous difference. The United Way, in their recent letter to the Minister of Finance, also supports this recommendation.

We've recently gathered some statistics from across the country from some of our larger community foundations—the nine largest community foundations—that demonstrate the impact of this tax provision. Several gifts of at least $1 million, many for more than that, were made as a direct result of the introduction of this measure.

So far in 1999, $41 million worth of stock has been received by these nine community foundations. In the community foundations here in Ottawa, we've received stock gifts of $2.5 million so far this year. That represents 80% of our new gifts this year.

So one thing we've learned is that this works. It is a motivation for donors. It is something that charities can accommodate easily. We've also learned that there are some tax provisions, such as this one, that on the surface may appear to benefit only the larger institutions. In fact they benefit community foundations, and through community foundations the smaller, local, more grassroots organizations benefit, because that's where we make our grants.

Thank you for the opportunity of speaking. I will be glad to answer any questions.

The Acting Chair (Mrs. Karen Redman): Thank you very much. We'll now hear from Ms. Liz Evans, associate executive director of the Portland Hotel Society. Welcome.

Ms. Liz Evans (Associate Executive Director, Portland Hotel Society): Thank you very much for inviting me to come today to speak to you.

I work with the Portland Hotel Society, which is a non-profit housing society in Vancouver's downtown east side. Our society attempts to provide housing support and advocacy for those who have absolutely no other housing alternatives. They are a group that are often perceived by themselves and other people as undeserving, and sometimes even as less than human. They live daily in the face of homelessness.

Homelessness in Vancouver looks a little different from homelessness in Toronto. What saved lives and prevented a lot of pain is the fact that the provincial and municipal governments have continued to invest in social housing in B.C. over the past eight years.

In Toronto it's much worse, as neither the province nor the city have done anything. It's no coincidence that there is a present national disaster.

Currently, 7,000 people in Vancouver's downtown east side live in tiny, unsuitable, often slum-like hotel rooms. These are better than nothing, however. Residents of the hotels may share sometimes just four bathrooms between as many as 70 people. This is the only cheap housing currently available to a single person living on welfare, and it's under great threat of being lost entirely.

Over 900 of these small hotel rooms have been lost in the last three years alone, a tide that without a federal commitment, the city and the province can't stand. Things are only getting worse, and by not investing now, we will all have to pay later.

The group targeted by our society are those for whom there are no other options, those perceived often as the bottom. They are frequently evicted, often in crisis. Many live with HIV/AIDS, have drug and alcohol addictions, and chronic mental illness.

What we attempt to do at the hotel is provide a form of asylum for people who have been socially alienated and denied service. By asylum, I mean a place that accepts where people are at now, doesn't evict people but rather stabilizes their housing, and then seeks to address their real-life issues in a pragmatic way.

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The fact that drug addicts are criminalized and that so much moralization goes along with addiction makes providing housing and support for this group very difficult. By treating them as criminals, we push them further away from mainstream society.

An example of the human cost of this public policy is the resultant desperation that has led in some cases to involvement in the sex trade. There are presently 25 women missing on the downtown east side. Many will be found dead and murdered simply because we collectively have forced them into selling their bodies for a $10 hit.

We've followed in the footsteps of the failed American model, where vast sums of money have been directed into enforcement strategies and Just Say No campaigns, and yet America still has one of the highest rates of drug consumption in the world. In Canada this lack of support and institutional abandonment has led to AIDS, pain, and a tremendous amount of suffering.

The reinstatement of a federal-provincial housing strategy is critical and obvious. However, it does need to address the reality of this population. This is a vital part of the continuous housing needs that have to be developed and supported if the problem of homelessness is to be seriously addressed.

While many see this group as dysfunctional or as a social burden, my own experience over the last nine years has been that this group is made up of human beings with the same hopes and fears as you and I have. Many come from families no different from ours. The result of their mistreatment is that we collectively suffer. The health of our communities has been severely affected. The results are crime, overdose death rates, and HIV.

We need to seriously rethink our drug policy. We can't just build housing and expect people's lives to turn around if having an addiction continues to mean having to resort to whatever means possible to obtain drugs. Such stable housing, however, can form the foundation of building a new future for this group. We need to seriously address drug addiction as a health issue rather than a criminal issue.

The finance committee needs to support a national housing strategy, but it needs to include looking at ways of supporting drug users. We have solid examples of programs in other countries that have proven to have tremendous social benefits, in the U.K., Switzerland, and Germany. All have shown that providing entrenched drug addicts with safe supplies of drugs, a place to live, and counselling is cost-effective and also results in social change. It reduces crime and reduces unemployment.

I believe that given the opportunity, a group of people who are now seen as worthless and useless can be viewed as members of our community, contributors, and worthwhile human beings.

Living in slums and on the street, injecting drugs in alleyways, and infecting each other with a deadly virus have all become the norm for drug users in Vancouver. The current crisis demands strong federal leadership and a commitment to building a more humane society. Public opinion has moved significantly on this issue as the results of the HIV crisis have impacted upon so many Canadians' lives.

I appeal to the present government to show leadership and courage by taking the challenge to examine the current “war on drugs” mentality, question the results of our existing drug policy, and look at its effects on those who are living and dying on our streets.


The Acting Chair (Mrs. Karen Redman): Thank you very much.

We'll now hear from Mr. David Comba, director, and Mr. John A. Hansuld, past president, of the Prospectors and Developers Association of Canada. Mr. Hansuld is also president of Central Asia Gold Fields Corporation.


Mr. David Comba (Director, Issues Management, Prospectors and Developers Association of Canada): Thank you. Good afternoon.

I'm a geologist by profession and currently serve as director of issues management for the Prospectors and Developers Association of Canada. With me is my colleague, John Hansuld, the past president of the PDAC.

On behalf of the many individual prospectors and junior companies that belong to the PDAC, I'd like to thank you for the opportunity to speak to you. I would also like you to consider today's presentation as an addendum to the background material you've already received.

I would like to stress at the onset that the mining sustainability chain is a continuum, and prospectors and junior companies are at the very start of that chain. We're subject to commodity price cycles. We've gone through these cycles in the past without assistance.

The crisis we now find ourselves in is not just another downturn. In fact on Friday there was an article in the Financial Post by a columnist, William Hanley, entitled “Junior mining hits rock bottom”, which talked about the fact that the junior companies have failed to respond to improving commodity prices.

The board of directors of the Prospectors and Developers Association was very reluctant to call this a crisis, and in fact only did so at the beginning of November. Why now? Well, there have been some profound structural changes in our industry, and these are coinciding with a commodity price slump unlike any other we've seen in the industry.

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Junior companies are no longer on the radar scopes of high-risk investors. There is almost a feeding frenzy at the current time for Internet stocks. This is the “.com bubble”. Equity financings are almost impossible to conclude and are very dilutive to junior companies at the depressed share prices of today. Unable to raise money, the juniors have been unable to take advantage of grants and tax credit systems that some provinces and territories have put in place within the last year or two to help the junior mining sector.

To determine what's needed, we have to look back sixteen years to a federal program that helped exploration recover from another severe structural change in the early 1980s. This federal program was called the mineral exploration depletion allowance. It worked well—in fact some would say too well. In hindsight it's easy to see the program should only have been in place for two to three years, and not the four years between 1983 and 1987. This program, called MEDA, also had some structural problems with respect to the timing of expenditures, and it allowed major underground work to be eligible. We've learned from these structural problems, and we can do better in the future.

What we are asking Finance to do is help us to reinvent the flowthrough share premium. By increasing the time available for expenditure almost fourfold, the greatest prior impediment to compliance is addressed. By working with our organization, definitions and guidelines of what qualifies for exploration expenditures can be clarified and tightened up. And we are currently working with Revenue Canada on the definition of a prospector. It may seem very elementary, but the last guideline issued by the department was in 1982. Our organization is working with Revenue Canada to explain exactly what a prospector does and who qualifies, and who is just a land speculator.

We believe we can work with Finance at improving the definitions and the guidelines of qualifying expenditures for this revised flowthrough share program. We also can determine that we can ensure a proper sunset so that there is closure on this program, and a number of independently monitored and mutually reinforcing activity measures can be set in place.

We know we can work with the new western venture capital exchange, which could provide volumes traded and dollars traded. We can work with the Canadian Diamond Drilling Association for monthly footage totals. We can work with Gamma International, which provides statistics on the frequency and size of financings.

Also, what we are proposing is that at the end of three years, there be a mandatory review. It's our intention that this be a temporary program. There will be costs, but there will also be benefits. The initial cost is the tax deduction premium, which will essentially be available to investors to write off on all of their income. If this program is not successful and we fail to incite investors, there is no cost to the government, so it's risk-free in that area. Because of alternative minimum tax measures that have been enacted in the years since MEDA, there's also not the chance that we can get into the extremes of 1986 and 1987. In both of those years, the prior program raised over $1.2 billion.

Between these two extremes, we believe a short-term tax deduction premium will reduce direct income tax revenue. However, this revenue loss will be offset by increased employment and by income tax on salaries paid to personnel engaged in field work, as well as federal and provincial taxes collected on goods and services, especially consumables. Revenue is also recouped by capital gains tax on the eventual sale by the investor of the focused flowthrough shares.

When mines are discovered, the wealth created is fixed. I'd like to point out that unlike the high-tech industries and many service industries, ore bodies can't be picked up and moved to go to a new jurisdiction if there's a more favourable tax or if there's a takeover. The ore body, the mine, stays in place.

I'd like to talk now a little bit about Canada's second diamond mine, which just received the go-ahead here in Ottawa about three weeks ago. It's called Diavik. In order to bring that mine into production, the costs are going to be $1.3 billion. The mine life is going to be measured in decades. Community benefit agreements have already been entered into and for the first time ever there will be diamond sorting, grading, and value-added activities all taking place in Yellowknife.

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While a long time coming, the royalty and the tax revenues that are going to come from Diavik and Ekati, which is already in production, are paybacks for those MEDA years of 1983 and 1987. Grenville Thomas, the president of Aber Resources, which found Diavik, is a personal friend of mine. He told me on a number of occasions how essential it was during those years of 1983 to 1987, when there was a premium in place on flowthrough shares, to do the background work to find diamonds in Canada. If he'd gone out on the street with a prospectus at that time, he couldn't have raised money, because everybody knew there were no diamonds in Canada. So this is a real success story for our industry.

In order to reverse the negative trend currently being experienced by the industry and to prevent significant economic hardship from befalling the more than 150 northern and rural communities depending on mining and mining exploration, recognition is needed from all levels of government. Stimulating high-risk investment will resuscitate the junior mining sector, which in turn will provide an economic stimulus to the exploration service industry.

This support industry ranges from local accommodation to groceries for field camps, charter aircraft and helicopters, regional drilling contractors, and heavy equipment operators if tote roads and stripping are required. The reintroduction of a short-term revised focused flowthrough share program will provide the needed stimulus.

By increasing exploration investment, economic activity in rural and northern communities will be stimulated, existing jobs will be saved, and new employment opportunities will be created, particularly for aboriginal communities. As well, this raises the possibility of finding another new major discovery that will lead to new wealth, replace existing reserves, and sustain the rail, seaway, and port facilities in Canada, which are dependent upon mining. Such a discovery would also reignite investor confidence and trigger the sunset provision, which Finance would like to see in any revised plan.

I would like to thank the standing committee for allowing our association the opportunity to speak to you today. In closing, may I remind you of the great untapped mineral wealth that lies buried, awaiting discovery, and what that wealth can do for Canada's social and health programs.

High-tech prospecting discovered diamonds in the Northwest Territories and nickel, copper, and cobalt in Voisey's Bay in Labrador. Given the chance, junior companies can do it all again, as long as we get some timely pump priming, and that priming needs to be now.

The Acting Chair (Mrs. Karen Redman): Thank you very much. We will now hear from the City of Timmins, Mayor Victor Power. Welcome.

Mr. Victor Power (Mayor, City of Timmins): Madam Chair and honourable members of the Standing Committee on Finance, first I thank you on behalf of the City of Timmins for the opportunity to present to you today. In case anyone is not aware, Timmins is the largest city in Canada in terms of geography. It is 1,224 square miles. As they say in Timmins, the gold runs deep and the star shines bright on Shania Twain.

I want to mention first that the gold mining communities of Canada are in a crisis situation. Since January 1, 1998, 15 gold mines have closed in Canada. Three of those closings had a direct impact on the city of Timmins.

Kirkland Lake, which once had 10 producing mines within its boundaries, had its last one closed, and Yellowknife had one of its two mines shut. The loss of the jobs at these mines is multiplied by the impact on firms providing supplies and services. There are only 38 gold mines still operating in Canada. They provide direct employment for 6,500 persons and many more thousands indirectly.

Although there has been a minor upswing in the world price of gold since September, the truth is that price uncertainty remains the prevailing rule. We all realize that the world price of gold is beyond Canada's ability to control, but there are many things our government can do to assist the gold mining industry and the communities dependent upon it.

Today we wish to discuss three positive steps: first, the revival of the Emergency Gold Mining Assistance Act; second, the cessation of selling gold for the present; and three, the reimplementation of the mineral exploration depletion allowance or MEDA. The first two items are tied together.

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In light of the decision on September 26 by 15 major institutions to limit gold sales to about 400 tonnes annually for five years, Canada's policy of selling all the gold in its official international reserves makes little sense. As the fifth largest gold-producing nation, Canada benefits from any increase in the world price. Many experts feel Canada's sales during a period of long-term decline in the world price accelerated that decline. By being a constant seller of gold, Canada sends a message to investors that it holds bullion in low regard. It is in our national interest to cease selling gold.

We realize that our past efforts to halt the gold sales and to enlist the federal government's assistance in convincing other nations to stop huge sales failed. But in recent weeks the entire situation has changed. At the end of October there were only 1.8 million ounces left in our official international reserves. But we could send a positive signal to the world by changing our policy.

That action alone, however, would not be sufficient to revive the industry in Canada. A more positive step would be to provide a floor price for gold. This is neither new nor revolutionary. Canada, under a Liberal government we might add, did in 1948 under the Emergency Gold Mining Assistance Act. This act was in force from 1948 to 1976, although no gold was purchased under it after 1971.

The stated purpose of the act was to help the industry adjust to changing conditions over a period of time. This was accomplished in that there were 117 producing mines in 1948 and only 37 in 1971. The way the act worked was that mining companies could sell their gold to the federal government at the International Monetary Fund price for gold, which was then, from 1934 to May 8, 1972, $35 U.S. an ounce.

Those mines that would have operated at a loss, unless there was EGMA, received cost assistance per ounce that ranged from a low of $2.55 in 1955 to $9.22 in 1969.

It must be stressed that not all gold mines were eligible for assistance. Help was dependent on the individual mine's cost of producing an ounce of gold. If the mine was profitable without government help, then it did not receive any assistance. Therefore, it is reasonable to assume that should a floor price be established today, not all producers would be eligible to sell their gold to the government.

To return to the period 1948 through 1971, it is important to look at the benefits that accrued to Ottawa. The government purchased 61.8 million ounces of gold and EGMA payments totalled $303 million, or an average subsidy of $4.90 an ounce. That gold was used to back the Canadian dollar or for international trade transactions until 1976, when the government of the day decided to sell its gold.

Its new philosophy was that assets should provide a return, and gold sitting in vaults fails to do that. While that is true, we do think there is a relationship between today's weak Canadian dollar and the amount of gold in our reserve account.

Those who signed the Washington gold accord, the 11 members of the euro system, the European Central Bank, Switzerland, Sweden, and the United Kingdom, said gold will remain an important element of global monetary reserves. This is an admission that several decades of efforts by nations and central banks to eliminate the role of gold in the monetary system have failed.

It is not just the 15 institutions that signed the accord that believe in gold. The United States, Japan, the IMF, and the Bank for International Settlements have all agreed to abide by it. As well, Australia and South Africa are not expected to sell from their reserves. Thus, as of September 30, 1999, nations and institutions controlling 85.1% of the world's gold supply have withdrawn their holdings from the market.

The strongest currency in the world today is the United States' dollar. We think that is partially due to its holding 8,139 tonnes of gold. You notice the United States does not sell gold. That is 24.3% of the world's total supply of gold—33,513 tonnes. In 1976, Canada had 20.9 million ounces of gold in its reserves. Since then it has sold all but 1.8 million ounces, or 68 tonnes.

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The Acting Chair (Mrs. Karen Redman): Mayor Power, I would ask that you make concluding remarks so we can save time for the committee members to ask questions.

Mr. Victor Power: Yes. I will not go into a long harangue then about MEDA because members have already heard that from the Prospectors and Developers Association. Needless to say, exploration is the lifeblood of our economy, and without exploration we just aren't going anywhere.

We notice that whereas just a few years ago the ratio was 60% exploration dollars by major firms in Canada and 40% outside, it's turned around now to 19% in Canada and 81% outside Canada. Something has to be done on that front.

We do thank members for giving us the opportunity to present these thoughts today and we look forward to any questions members might have, and hopefully a positive result in the February budget.

The Acting Chair (Mrs. Karen Redman): We will now go to questions and start with Mr. Forseth.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Madam Chair, I will direct my first question to the CNIB. I see in their brief:

    Therefore, we submit that the government should continue to encourage Canadians to donate to charitable organizations through appropriate tax incentives. We understand that the Department of Finance is working with a task force established by the Voluntary Sector Roundtable, to consider tax incentives for donors. We look forward to learning the results of this project.

Does the CNIB have any preliminary hints at what it would like to see changed in the current tax parameters for societies and organizations that do obtain charitable status as a privileged destination for voluntary contributions? From the CNIB view, what needs to be changed in the federal budgetary process to enhance the charitable donations sector?

Ms. Fran Cutler: I will speak to that. Our colleague here, Barbara McInnes, with Community Foundations of Canada, spoke eloquently on the advantages to not-for-profit and charitable organizations of a write-off of donated securities. At the moment, and for the last three years, the policy has been that people can write off 50% of the capital gains on securities and other property.

We, along with many organizations in the not-for-profit sector, including universities and charities, would see great benefits from 100% write-offs. We have had no indications yet from the round table or from any other sources whether this is under serious consideration, but we know it would make a great difference to people giving donations, either while they are alive or through bequests and endowments. Apparently in the United States it's been a most effective tool.

The Acting Chair (Mrs. Karen Redman): Ms. McInnes, did you want to respond as well?

Ms. Barbara McInnes: Yes, I can just emphasize what I have already said.

The other thing to emphasize is that this is something that works. It does appeal to donors. It makes it very viable to work with especially large donors, and it makes us more competitive with organizations that are building their capacity this way in the U.S.

We think it's something to be strongly argued for.

Mr. Paul Forseth: Next I will go to the representative of the Portland Hotel Society. In your brief you say straight out that there is an obvious need to reinstate a federal housing program.

The kind of specialized services you describe are essentially provincial jurisdiction responsibilities. Perhaps you could outline the shape of what you mean by a federal housing program and, at least briefly, what you would be looking for.

Ms. Liz Evans: Prior to 1993 there was a federal-provincial housing program in which the federal government gave two-thirds and the provinces paid a third toward building a supply of social housing. When that was cut off, it severely impacted on the supply of housing available to low-income Canadians across the country.

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The group we specifically deal with is a group of people who exist across the country as well and are at the very bottom of the spectrum. However, as people filter up into social housing, you're left with the group at the bottom, and that's the group we're dealing with. But the whole city is affected by supply. That's why I talked about the hotels, because right now the only supply available in Vancouver for low-income people is the single-room hotel units.

So supply is a significant part of the whole homelessness picture. You can't have just one piece of the puzzle responded to. I'm trying to focus on a specific-need group, but I don't think you can solve the problem of homelessness without creating a healthy supply.

Mr. Paul Forseth: Years ago, through CMHC, we had a program where the province gave a one-third grant, a society came up with 10% of overall costs and ran a specific facility for seniors or whatever, and the balance was financed at subsidized very low interest rates over a long time by CMHC. But that program is long gone. Is that the kind of program you're talking about, or something else?

Ms. Liz Evans: That sounds like the kind of thing I was talking about.

Mr. Paul Forseth: Okay, so you're recommending that we go back to that system. I do know that in my riding, we have lots of seniors' facilities, run by various churches or charitable organizations, that were built during that period of time, but once that program disappears, we're not having any of those new facilities come onstream.

When I look at the impending social demographic change, we're going to have more seniors, and we're not producing the supply. You're talking about an individual who needs specialized services. You're saying societies would organize themselves to address that specific problem, would come forward under those kinds of incentives.

Ms. Liz Evans: They could come out of the same kind of supply program, although I guess what I'm trying to say is if the program were going to try to address the issue of homelessness across the country, it would have to have room in it to address the specific needs of subgroups such as the group our society addresses. And it would need some flexibility for new types of programs, because currently any social housing that gets built doesn't actually accommodate the group we're dealing with, so as a result you end up with a group that is always on the street. It's just talking about the flexibility you need to write into that kind of program.

Mr. Paul Forseth: Okay.

I would like to talk about the mining sector. There's a recommendation here for the reintroduction of a short-term, revised, focused flowthrough share program. Perhaps for the record you could describe what that really is and maybe some notions about why it was ended. Why do you see that particular flowthrough share program as so vital? And have you made any estimations as to what the tax expenditure to the government would be if it were reintroduced?

Mr. David Comba: Exploration, whether it's for oil, gas, or minerals, is a very high-risk endeavour. For many years now, it's been possible that in the year a company makes an expenditure on exploration, they've been able to write that expenditure off in the year it was made. For junior mining exploration companies, which essentially are not taxable, having a tax credit really wasn't of much value to the company itself. So a program was devised of being able to flow that tax credit through to investors. This was called a flowthrough share.

The shares were treated very differently by the securities commissions across the country. The shares had to be held for at least one year after they were purchased by the investor. And Revenue Canada has treated shares of that nature very differently. When the shares are eventually sold, the investor has to pay capital gains tax on all the proceeds of the disposition. In other words, Revenue Canada's attitude is that those shares come for nothing.

How the program is working right now—and I'm a director of a junior company that's presently attempting to do a financing in this market—is that the shareholder who buys those does get that 100% write-off. But during the period 1983 to 1987, the federal government created a premium, so instead of a 100% write-off, the investor got a 133.33% write-off.

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What this means for revenue, both federally and provincially, is that there is a loss of income in the year in which the investor makes his investment. But the money has to be spent in Canada, and money is essentially recouped by the federal and the provincial governments through income tax from the people who are employed; through provincial and national taxes on goods and services; and eventually, when the investor sells the shares, there's a clawback of the capital gains on the disposition of those shares.

The program was very successful. It started rather slowly in 1983, with about $50 million being raised. That went up to about $400 million the following year, and then in 1986 and 1987 it just took off, but there were conditions then that don't apply now. About that time, the federal government did away with the $100,000 exemption on capital gains, and there was no minimum tax in place at the time. So in those years, a tremendous amount of money was made.

Revenue Canada has done studies on the impact to governments. The biggest complaint I have about those studies is that they only looked from a very narrow accounting point of view over a short period of time, and two key things weren't addressed in those studies.

First of all, no one asked what was found, and yet the whole point of this program was to find mines. I haven't been able to find anywhere where they've actually discussed what was found.

It's not only the mines that came into production. I was directly involved with the discovery of the Lindsley mine in Sudbury in 1987. I was the chief exploration geologist for Falconbridge in Sudbury, Ontario, and that mine was financed through flowthrough. Falconbridge was actually one of the few major companies that took advantage of that program. But nowhere in the Revenue Canada studies has anybody looked at the tremendous mineral wealth, whether it's diamonds or copper or nickel, that was found during that period.

Also, many deposits were found that have still not come into production. If anybody knows our industry, it's quite typical that things are found and it's only years later that they come into production. So there were deposits such as the Thor Lake beryllium deposit, which will probably be in production sometime in the next century, but it's added to Canada's mineral wealth.

It's also added a tremendous amount of information to the geoscience database for the country. For the last decade, the federal and provincial governments have been scaling back the amount of money they're prepared to spend on geological surveys for the provinces and territories. That program gave a tremendous amount of information into those geoscience databases to make up for the loss of direct funding by the government.

So essentially what we end up with is a tradeoff. We can't come up with specific numbers. I've talked to people in Finance, and they say, “Look, we just don't have the ability to track. We know what the initial loss to the treasury is, but it's very difficult for us to keep track of who is employed, for how many years, what their income was, the sale of shares, etc.”

So it's a bit of a mug's game to try to put quantitative values on it, but we know that from the mines that were found—Louvicourt in Val-d'Or, Eskay Creek in British Columbia, Lindsley, and others—this has had a tremendous impact on adding to the mineral wealth of Canada and sustaining our mining industry and the northern communities that depend on that industry.

The Acting Chair (Mrs. Karen Redman): Thank you.

Very quickly, Mr. Hansuld.

Mr. John A. Hansuld (President, Central Asia Gold Fields Corporation; Past President, Prospectors and Developers Association of Canada): I'd just like to add that the flowthrough share, with the MEDA bump-up in the 1980s, was probably the most effective, efficient program of regional development this country has ever witnessed, and ironically, it didn't have one employee. A lot of money was moved from Mount Royal, Forest Hills, and Shaughnessy to Val-d'Or, even Timmins, and the Yukon.

I'll make another quick observation. I notice most of this panel is from southern Ontario or southern parts of this country. We talk a lot about the north, and admittedly mining exploration is probably more critical to the north, but a study we did some years ago showed there were more people employed by the mineral industry, particularly mineral exploration, in greater Toronto than anywhere else in Canada, with the support services, legal, accounting, and so on. So this is not just a northern problem, although it's more critical there.

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I will conclude by echoing the plea of my colleague: if we're going to have a sustainable mining industry in Canada, we need a robust mineral exploration program and we really need it now.

The Acting Chair (Mrs. Karen Redman): Thank you.

The honourable Lorne Nystrom...and I understand you'll be sharing your time with Ms. Davies, Mr. Nystrom.

Mr. Lorne Nystrom (Regina—Qu'Appelle, NDP): Yes, I'll be sharing my time with Libby Davies, if I may, Madam Chair. I have one very quick question and then Ms. Davies will have some questions for someone else.

I want to ask Mayor Power if he can describe to us what the slowdown in the mining industry has meant in terms of people in Timmins in regard to the unemployment rate, poverty, and the issues of that sort that are affecting the ordinary citizens.

One of your citizens, Cid Samson, used to tell me a bit about it a few years ago when he was a member of Parliament from your part of the world.

Can you tell us what has happened in terms of people? Are people leaving Timmins? Are the unemployment lines longer? Do you have a food bank? What has it done to the welfare rolls? Can you put a human face on things of that sort?

Mr. Victor Power: Honourable member, 15 years ago we didn't have a food bank and we didn't have a Lord's Kitchen, but we have those things now, so that tells you something right there.

But I think the biggest impact has been on our young people. The young people are leaving places like Timmins. They just don't have jobs to go to. I keep hearing about jobs being created, but when I talk about jobs being created...not to look down on anybody, but I am not too excited about creating $7.50-an-hour jobs. When I'm talking about mining jobs I'm talking about people making $15 to $20 an hour, plus benefits. That is the type of job we would like to see created, but that's not what's happening now.

We've had mines shut down and we've also had mines downsizing. This means that the people who are working are reasonably well off, but the people who are young and coming up to bat are just never going to get to play in the game—at least the way it looks right now.

This is a big problem. It's all very well to say that people should go through for the professions, but they're not all going to be doctors and lawyers, and even if they are, they sometimes have to find opportunities elsewhere too. This is the biggest thing. It's a real negative for the young people of Timmins and communities such as Timmins.

Ms. Libby Davies (Vancouver East, NDP): Thank you, Madam Chair.

I'd like to address some comments to Liz. I represent the riding she spoke about today, and the area she spoke about, the downtown east side. It seems a bit strange to be in this room and hear about gold mines on the one hand and then hear about people in the downtown east side who are literally on the street.

I noticed, Liz, that you circulated “A Poem of Remembrance to Linda”, who is one of the people who has been, I guess we could say, a victim of the system. I will read a couple of the opening lines to humanize the issue we are talking about:

I heard her tear the air with rage that let everyone know Rage that let the streets of displacement know Rage that let the buildings of exclusion know That an insult and an indignity and an injustice Has been done to a human being.

That's from a poem by Bud Osborne.

If the national housing programs you spoke about were still in existence, as well as the programs and the services for the particular needs of people who are facing addiction, maybe Linda wouldn't have died. I know there are other people on the street who are pretty close to a very desperate situation.

In your handout, you actually make a proposal that the finance committee look at supporting a national pilot project on providing housing, a safe supply of narcotics through the health care system, and counselling over a two-year period. I know that in Europe they've had huge success with their programs. They've reduced the crime rate. They've brought people back into treatment, into employment. They've stabilized people.

If we had such a housing program, if we had such a pilot project as you speak about, what do you think would be the impact in the community that you work with in terms of bringing people back from the very edge and stabilizing the situation? What kinds of things would we see if that were to happen?

Ms. Liz Evans: Right now in B.C., on average, one person dies every day of a drug overdose. It's pretty appalling. That has been going on now for a number of years. Every year over 300 people are dying of drug overdoses. Those are completely preventable deaths, in my opinion, and I've known a number of those people just in the last nine years through the work I do.

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When I started doing this, I didn't really have any idea about drug policy. My background is in nursing, so I really didn't have a clue about what the reality of life looked like on the streets for people I work with now. I don't come at this as having had a preconceived idea that this is the only way to deal with the problem. I really didn't know. What I've found is that human beings, as a result of things like the fact that we view them as criminals because they have what is in my opinion a health issue, that being addiction, get so marginalized that they're basically forced to die. They're faced with drug overdoses or HIV/AIDS. They don't have a chance to actually get out of their addiction because they don't live long enough.

In other countries in which they've studied addiction patterns, people stay in their pattern for about six to eight years on average. That means they generally either choose to go through a program or whatever, and the addiction period will end. We're not giving Canadians a chance to even get out of that period, because they're dying. They're either overdosing or they're getting AIDS. Even if they do actually get to the point at which they want to get out of their addiction, they're basically doomed to die anyway.

I circulated a copy of a summary of a report that was done by the social planning department in Vancouver. There's a triangle on page 6 that explains something that I think is just a simple way of understanding what I'm trying to get at. It talks about housing in partnership with harm reduction programs. For certain people, they will never have access to what I consider to be simple, basic human rights, meaning housing and support services. The group I'm describing doesn't actually often have access to a GP. Their primary health care provider is St. Paul's Hospital emergency department, so we're not talking about a group of people who have any kind of social infrastructure whatsoever.

The triangle represents what we need to see. At the very bottom, we need to see what are called low-threshold services, including housing that just accepts the reality of where people are living, and including bringing people up into a system of care. The social safety net has to start at the very bottom for this group that presently doesn't have any alternatives. They have nowhere to live and they have no access to a safe supply of drugs.

In countries like the U.K. and Switzerland, they started out by saying they had a huge open drug scene like we have in Vancouver, where people are injecting in alleyways. The city doesn't like the way it looks, the businesses can't stand it, and neither can the tourism. Those of us who live and work there are deeply impacted by it every day. The open drug scene that existed in Frankfurt was dissipated almost overnight by the implementation of a few very simple programs, including safe injections. People could go off the street and, under the administration of nurses and medical practitioners, inject safely somewhere where they weren't going to overdose or get infected with AIDS.

Once they were brought into the system, these people were then able to access other things, including, very sensibly, housing and ultimately job training and employment. Once their lives then became stabilized and they had enough support, some got off the drugs. Some didn't, but at least people's lives were maintained at a certain quality of existence that we're just not allowing people to even come close to at the moment in Vancouver.

Ms. Libby Davies: Do I have more time?

The Acting Chair (Mrs. Karen Redman): You actually don't, but I'll give you a minute if you'd like.

Ms. Libby Davies: Given that information from the European experience, I know there was a report that came out just last week, actually. It was funded by Health Canada, and it talked about the same kind of direction. So again I guess the question is, if that were implemented, would we...? My feeling is that we'd see a huge improvement in the scene in the downtown east side, and it would be financially a very cost-efficient way of providing services.

Ms. Liz Evans: It would be incredibly cost-effective, and ultimately I don't think we're very far away from being able to do it. People think we're light-years away from actually being able to implement something like this, but research has been done by the Addiction Research Foundation and the B.C. Centre for Excellence in HIV/AIDS. They've done ethical reports and they've done cost analysis reports, and we're very close to being able to actually implement it. But what we need now is leadership. What we need now is somebody to say, “Okay, put it in a federal program”, in order to allow us just to initiate a pilot project. Overnight, you would see lives saved and the HIV spread would end. It's as simple as that. It's not complicated.

Studies have been written to death. There's the national action plan, and there's also the new report that the HIV-AIDS Legal Network has come out with. The latter has some incredibly strong expert opinions from people who are much stronger research people than I am. My experience is very front-line and very first-hand, though, so I can certainly speak about the impacts on peoples' lives.

The Acting Chair (Mrs. Karen Redman): Thank you very much.

We'll now go to Ms. Leung, and then Mr. St-Julien.

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Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Madam Chair.

I first want to thank you all for sharing your ideas and concerns with us today.

Liz Evans from Vancouver, welcome to Ottawa. As you know, I visited your society, and I was very impressed with both your management and the way you care for the really marginal people.

I know housing's important, but as you already have expressed, those people are facing multi problems. For instance, health is very important. In your opinion, how can the federal government take a team approach with regard to housing, social problems, counselling, and integrated health? As you indicated, this group of people will not really be able to receive anything but the traditional approach to health care. Would you give us some idea of what you think is the approach we can offer?

I know I arranged for you to have a dialogue with the Minister of Health's office. Can you tell us about it?

Ms. Liz Evans: I think it has to start with very low expectations. What we've done with our society is just accommodate the reality of the group we're housing by saying, yes, we'll provide you with housing, but we're not going to expect you, within six months of moving into our housing project, to have a life that looks different. It's not realistic. So we have to accept the reality of where people are at and attempt to stabilize them.

Then what we can do is bring services that are appropriate and flexible to meet people's needs where they are. Raising expectations around expecting people to make appointments and going places on time is not realistic. There are lots of bureaucratic structures that make it very hard for people to access very simple resources. We've tried to create something that's flexible, that fits into the reality of where people are living.

We don't do ourselves any favours by deluding ourselves and refusing somebody service based on the fact that we don't approve of what their lives look like. That doesn't actually benefit any of us. Communities suffer tremendously as a result. I think we need to open our eyes to what people are actually doing, who they are, and their reality, and then try to make our programs really respond to that reality as opposed to trying to fit it in to look differently.

Practically, as you said, we do need to integrate. We have to work with the departments of justice and health and housing to make something comprehensive. These problems are very complicated.

I apologize if I go on, but it's hard to say there's one solution. You have to work as comprehensively as possible to actually recognize that as Canadians we don't like the fact that we have people living in alleyways and injecting drugs and dying of AIDS. It looks gross. We're not comfortable with it. I think we're a much more humane society than that.

Ms. Sophia Leung: I understand the federal government has given a grant to the coalition of $5 million, or $1 million for each year, through the Department of Justice. Are you involved in receiving any of that grant money?

Ms. Liz Evans: No.

Ms. Sophia Leung: Then probably you should mention that to Mayor Owen.

Ms. Liz Evans: The Vancouver agreement?

Ms. Sophia Leung: Yes. Are you receiving some?

Ms. Liz Evans: No. A process called Community Directions is going on right now in Vancouver. People are meeting to discuss what's going to happen.

But you're right, that would be the perfect place for some of that money to be channelled through in terms of actually starting a pilot project or saying this is a place we could actually start to deal with the problem practically.

Ms. Sophia Leung: I also have a short question for the CFC.

I know of some of your work through the Vancouver Foundation. You do excellent work.

As you commented on page 4, the disbursement is 4.5% annually, and you're asking for a review of that. Do you find that's not fair or too much? I want to get some idea on that, because it's a level I guess this government set.

Would you like to expand on that a little bit?

Ms. Barbara McInnes: Yes, I would. The 4.5% was set many years ago, at a time when interest rates were very high and it seemed reasonable to expect that 4.5% would be a reasonable amount and would not deplete permanent endowments over time. The reality today is that this can't happen.

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Community Foundations builds relationships with donors whose gifts are meant to be kept in perpetuity. A donor gives the gift today and the expectation is that the capital will be retained forever and it will be guarded from inflation. It would be protected and retain its buying power over time. At the same time, we would meet the disbursement quota, which is 4.5%.

As a matter of fact, you can't do all those things any more. It's impossible to fulfil all of those expectations. Our suggestion is that this be looked at now with a view to perhaps adjusting it, either across the board for all endowments or for at least the smaller ones that are growing and don't have the opportunity to participate in the stock market, for example, the way larger endowments do.

The Acting Chair (Mrs. Karen Redman): Thank you.

Mr. St-Julien.


Mr. Guy St-Julien (Abitibi—Baie-James—Nunavik, Lib.): My question is for the people from the Prospectors and Developers Association of Canada. In Abitibi at the moment, the situation is very serious. Since the Asian crisis, the price of metals has dropped. We have lost 2,000 jobs in the past two years in the mining sector.

The talk at the moment is of flow-through shares. Since the Bre-X affair, investors have been hesitant to invest. As the result of Revenue Canada's investigations in Abitibi over the past two years, the credibility of flow-through shares has to be re- established, but most importantly, a way must be found to make investors and promoters accountable. Promoters must be responsible for the money they come up with to finance flow-through shares. A way must be found especially to ensure that administration costs are not exorbitant according to the prospectus established by securities values. A price list of 10% must be set instead of really high administration costs. A way must also be found to keep small business here. As we know, the major companies have left Canada.

I have tabled a motion in the House of Commons calling on the government to consider setting up a national committee comprising representatives of the federal government, the Mining Association of Canada, the Quebec Prospectors Association and the Prospectors and Developers Association of Canada in order to clarify the expenses that are eligible in the context of the flow-through shares plan for the mining sector.

We have credibility, we know. We also know that we must find a new approach to mining exploration. I would like your opinion. Should we make the promoter accountable and find new ways to give credibility to those selling flow-through shares?


Mr. David Comba: First of all, our industry very much has changed because of the Bre-X scandal and some other mismanagement programs that happened to Canadian junior companies, particularly in Africa.

I'm a member of a task force from the Ontario Securities Commission and the Toronto Stock Exchange that is raising the bar. Currently we have out in public for comment and feedback from our industry the industry best practices and reporting guidelines. Essential to this is a requirement, to become part of national policy 43-101, from the Toronto Stock Exchange and the OSC that qualified persons—that is, graduates with a minimum of five years of experience—are to be on the board of junior exploration companies.

As well, all projects undertaken by those companies must be laid out, planned, supervised, and reported by qualified people. This is one of the steps we are undertaking nationally in order to improve the credibility of our industry.

As well, we have to some extent worked with financial institutions to restore investor confidence in the industry. That has to be part of the program of reintroducing the premium on flowthrough shares.

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As a national group, we have been invited to participate with Revenue Canada on working out the guidelines and clarifying the definitions of what is eligible for a Canadian exploration expenditure and how that is going to take place.

So we feel we are on track to meet these concerns about investors. We are aware that people have fraudulently used these processes in the past, and we are endeavouring to make sure any loopholes that existed in the old system will not exist in the new programs.


Mr. Guy St-Julien: Madam Chair, in Abitibi, in mining exploration, it is hard having the Revenue Canada inspectors arriving three years after the mining exploration was done to audit the work and determine the eligible expenses. There are grey areas, we know, but they arrive three years later. Would it not be a better idea for the Revenue Canada people to arrive the same year, audit the explorations and determine what expenses are eligible?

Three years after the fact, the government arrives and gives investors a new assessment. The promoter is not penalized, but the investor is. This has an affect on family social life. People have to pay money back and this fact entails social problems.

Do you not think that Revenue Canada should do an audit the year the mining exploration work is done?


The Acting Chair (Mrs. Karen Redman): Who would like to answer that? Mr. Hansuld.

Mr. John Hansuld: I would agree with that. However, I take issue with.... Bre-X got a lot of notoriety but was hardly the main factor. Metal prices and the competition from the Internet stocks far outweigh the credibility.

In fact our industry is no more credible or less credible than many others. What about LiveNet? What about YBM? What about the Philips service? All of these are debacles that Bre-X almost pales by. And they involved some of the top accounting firms.

So I think mining takes a bad rap, to be honest with you. I'm not being defensive, but if you look at things on a very broad basis, I don't think we deserve any more problems. In fact we're probably doing more to clean up our act than many of the other sectors of the economy are.

Mr. David Comba: Honourable member, I've had the pleasure this last week of working with Guy Parent, who is from your riding. He is this year's president of the Quebec Prospectors Association. We've discussed some of these issues with representatives of Revenue Canada. One of the keys is that we have to set up better definitions and guidelines, both for the auditors and for the people involved in the expenditures. We believe by doing that, we can first of all make it much clearer what is eligible and what is not, and that will make it that much easier for the auditors to come in earlier and make sure the expenditures are being reported properly.

We understand that audits have been undertaken in the province, particularly in northwestern Quebec, within the last year or so, and they have found a number of issues that were not reported properly. The big thing is, were they fraudulent and are they material? My understanding of what they have found is that for the most part, it is not really material. Forms weren't completed properly. People didn't really understand the definitions and therefore tried to write off things that weren't eligible.

But as for the few cases of actual fraud that have been uncovered, my understanding is there's a major case before the courts in Quebec right now of one individual who actually controls ten companies, and he was shaving each and every company.

We believe that Revenue Canada, especially in the province of Quebec, the Quebec finance department, is on top of these things, and we think our new program will be much easier to administer.

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Mr. Guy St-Julien: In Quebec it is 175% for flow-through shares, whereas in the rest of Canada, it is 100%.

If the government does not want to revive mining exploration at the rate of 133 1/3 as it was in the past... I have a document here prepared by geologists at home. I know the president of the Quebec Prospectors Association, Mr. Guy Parent, very well. The document was prepared by Les Forages Servant Inc. It says that there has to be a new approach to exploration: drilling to discover. People work in exploration for three or four months. Then they get employment insurance benefits for five or six months while they wait for new projects.

With a million dollar proposal, there should be a new way to locate a new mine; a pilot project could be set up, and people hired for a year. An alternative to flow-through shares must be found.

For years we have been fighting to get it raised to 133 1/3, but no one will budge. Have you found new approaches to mining exploration and new ways to present mining exploration to Revenue Canada and the Department of Finance?


The Acting Chair (Mrs. Karen Redman): I trust your answer will be a little more brief than the question.

Mr. David Comba: Mr. Guy Parent spent the latter part of last week in Quebec City, and we have assurance from the Quebec finance department that they will harmonize their write-off program to match that of the feds. If you take a 175% write-off and add it to 133%, the investor has no risk exposure at all, and that's not the intent. So the Quebec government have said yes, they are prepared to harmonize, because they realize as a national program, more money can come into Quebec than is raised currently within the province.

Quebec has probably one of the most innovative grant programs in the country in terms of deep-hole drilling. In older, established camps such as Rouyn-Noranda and Val-d'Or, the opportunity really lies at depth. What's near surface has been found and mined in the past. New discoveries will be made at depth. So they have a graduated scale there that will help drilling.

We're confident that with the accounting levels raised, the amount of money we would hope to be raised in the investment market will more than make up for the declining levels of activity in northwestern Quebec, especially the drilling levels in the last few years.

The Acting Chair (Mrs. Karen Redman): Thank you.

Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC): Thank you, Madam Chairperson.

Thank you for your presentations.

Firstly, I'm awfully pleased to hear that both the Community Foundations of Canada and the CNIB are supportive of a change or elimination of the capital gains taxes on the contribution to publicly trade securities. That is something we are hearing more and more of now. Within the volunteer sector, there seems to be almost complete agreement and unanimity on it, which is very positive. That certainly helps us when we're trying to effect change in a particular area of public policy.

I have a question to the CNIB relative to the HRDC Opportunities Fund. What is the cost of that fund currently? And I guess I didn't understand exactly; is that fund threatened at this point?

Mr. Angelo Nikias: I believe the Opportunities Fund is about $30 million a year. It was set up three years ago, and it was a three-year program. Unless it's renewed, it expires at the end of this fiscal year. Because an infrastructure of employment services for disabled Canadians depends on the Opportunities Fund, we are asking that some indication on the part of the government be given promptly so that this infrastructure not be dismantled.

Mr. Scott Brison: Has that indication been forthcoming from Human Resources, from the minister?

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Mr. Angelo Nikias: There has not been a public announcement that the Opportunities Fund will be continued. There have been indications, but unofficially, that the government is considering something. Of course, organizations such as the CNIB, which are going through a budgetary process right now, need to have some assurance that we can rely on the continuation of this fund, or a similar fund, to maintain our employment services. Otherwise, we will have to start winding down the existing infrastructure.

Ms. Fran Cutler: If I could add one point, we could tell you dozens and dozens of stories of how successful this program has been. In the three years it has been running we have seen people get a head start in the job market and get job placements, and they are now independent, taxpaying citizens.

Mr. Scott Brison: When we look at programs and see costs, it's very important sometimes to realize that we can actually quantify benefits in terms of providing someone with the opportunity to contribute meaningfully. I think that's awfully important to recognize.

Madam Chair, do I have time for one question for the Prospectors and Developers Association and one question for Ms. Evans?

The Acting Chair (Mrs. Karen Redman): You have time for one question.

Mr. Scott Brison: Do I have time for one question for Ms. Evans as well?

The Acting Chair (Mrs. Karen Redman): Sure.

Mr. Scott Brison: They're short questions.

The Acting Chair (Mrs. Karen Redman): As long as they're short.

Mr. Scott Brison: With regard to the flowthrough share program, I'd like you to compare that with what other countries are doing. Is it unique? Did Canada try an experiment and—

Mr. John Hansuld: Yes, and it worked big time.

Mr. David Comba: Canada is almost unique in the world in that we have junior companies and junior markets. The only other competitor we have is Australia, and they're a very distant second with regard to junior companies. Mining countries, such as South Africa, have been dominated by a few big mining houses, and the junior companies never got a chance to start there and survive. So this really gives Canada a leg up on the global competition. Junior companies have been very successful for this country.

Mr. Scott Brison: I'd just like to comment on Mr. Power's comment relative to the point that this could be a regional development program. The aversion to gold of the central banks within Europe, Canada, and other places has actually hurt places such as South Africa during the very critical time when democracy and freedom was taking root. It has really hurt significantly in that regard.

Ms. Evans, has any group you're aware of conducted a study comparing the cost of enforcement and the cost to the judiciary and the penal system of our current drug policies relative to the recreational drugs with the amount we're actually spending on prevention or, alternatively, on things such as housing and that sort of thing? Has anyone done that kind of evaluation in Canada?

Ms. Liz Evans: A federal committee came out with a report on the costs of crime a couple of years ago, and Elaine Scott gave me a copy of it. It focuses on criminal justice issues generally.

It doesn't isolate the drug piece, but it talks about the costs. We know, for example, that a person who goes into hospital with HIV costs in excess of $600,000 over their lifetime. There are a lot of other costs we don't see behind the policies we have now. It's extremely expensive. Between incarceration and hospitalization, we're spending a fortune. Housing is actually very cheap. Safe supply programs and things like that have been very cost effective in other countries, not to mention that they often result in employment.

Mr. Scott Brison: The problem with public policy is that we're often dealing with perceptions as opposed to realities. It's good to hear every now and then about the realities we're actually trying to deal with.

Thank you to all the witnesses today for your presentations.

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The Acting Chair (Mrs. Karen Redman): I'd like to thank all of the witnesses today. Rest assured that your comments and thoughtful presentations will be taken into consideration as we prepare our prebudget consultation paper to go to the Minister of Finance.

The meeting is adjourned.